Download LAW OF CONTRACT. Bampton and Drury – an agreement which

LAW OF CONTRACT.
Bampton and Drury – an agreement which creates and defines or intends to create and define legal
obligations within the parties themselves.
Madhuku and Manase- an agreement between parties which is recognised and enforced by law.
It is a lawful agreement made by 2 or more parties within the limits of their contractual capacity, with
the serious intention of creating a legal obligation, communicating such intention, without vagueness
each to the other and being of the same mind as to the subject matter to perform negative or positive
acts which are possible of performance.
An agreement which recognised and enforceable at law between 2 or more persons to do or abstain
from doing some acts or to get their intention being to creation of legal relations and not merely
exchange mutual promises. Balfour v. Balfour
NB: a contract has the effect of creating rights and duties that can be legally enforced. Contracts can
be made orally however certain types of contract need to be in writing e.g. sale of immovable’s,
suretyship e.t.c
While all contracts result from agreement it must be noted that not all agreements are contracts. Social
agreements do not qualify as contracts for example if solo asks Mutsai out for lunch at Mutape
restaurant and Mutsai does not turn up Solo cannot sue Mutsai for breach as this was a mere social
agreement not intended to create legal rights. Similarly domestic agreements do not pass as contracts.
This was made clear in Balfour v. Balfour where a husband promised to pay his wife a stated weekly
sum during his absence abroad. Mr Balfour faltered in his promise and the sued. The court held that
there was no contract since the agreement amounted to a domestic arrangement between spouses and
did not evidence intention to create legal relations.
Essentials of a Valid Contract
For an agreement to pass as a valid contract it must meet the following essentials.
1. There must be agreement
2. Parties must of the same mind to the subject matter (consensus ad idem). Raffles v.
Wichelhouse Facts : parties agreed to a sale of cotton to be delivered by ship from Bombay.
However there were 2 ships named peerless and in agreeing each party referred to a different
ship. Because the sailing time of the 2 ships was materially different neither party was willing
to agree shipment by the other peerless. Held : no binding contract because each party had a
different ship in mind when contract entered into. See also Dibbs v Werren.
3. Parties must communicate their intentions
4. Agreement must not be vague. Humphrey v. Cassell, Finestone v. Hamburg, Kantor v. Kantor
Facts: under a antenuptial agreement, the prospective husband agreed to settle on his future
wife ‘all furniture, linen, plate and domestic effects, together with any and all renewals of and
additions to the same, as he may then or thereafter acquire at such times and in such quantities
as he may be expedient to him to the value of R3000...’ Mrs Kantor sought performance of
his promise but her husband claimed that the contract was void for uncertainty. Held : in
favour of the husband, that the contract was indeed unenforceable since the terms of offer
were unclear and left the donor “free to act or not to act at all” as wished. Thus – in effect- the
so called agreement depended upon a condition which reserved to Mr Kantor an ‘unlimited
option’. The principle is that indefinite or uncertain offers can void a contract.
5. Agreement must be lawful Lion Match Company v Wessel. Wessel sued the company for the
price of wood sold and delivered by him to the company the sale was however illegal and
unenforceable because Wessel did not possess the required government licence and permit.
He lost his claim. The agreement must not contrary to public morals/good ( contra bonos
mores) contract to run a brothel is against public morals in Zimbabwe.
6. Parties must seriously intend to contract ( animus contrahendi)
7. Agreement must be within the limits of their contractual capacity
8. Agreement must be possible of performance lex cogit ad impossiblia. See Wilson v. Smith and
Alder v Bloemfontein Town Council
Formation of a contract
An offer has to be made by one party (offeror) to another to another (offeree) and accepted.
Offer + acceptance =agreement
Rules of Offer
An offer is a proposal put forward by one party with the intention that its acceptance by another
results in a contract. It expresses one’s willingness to become party to a contract and acceptance by
another binds both of them contractually.
All contracts begin with an offer. It must be noted that no legal rights are created until offer is
accepted. Until then the offer can lapse or be revoked.
Requirements of a valid offer
1. The offer must clear, definite and unambiguous. Kantor v Kantor, Humphreys v Cassell,
Finestone v Hamburg.
2. The offer must be consistent with the requirements/essentials of a valid contract:
i.e. it must be lawful, within limits of offeror’s contractual limits, made with serious intention
of being accepted, possible of performance.
3. The offer must be one on which an optional time has not expired
An option specifies the time within which the offeree can accept the offer. Boyd v. Nel
FACTS: Nel gave Boyd an option of 4 months to purchase a farm. Immediately afterwards
Nel permitted other persons to prospect the farm as a result of which the government issued
notice of intention to proclaim the farm as an alluvial digging. Meanwhile Boyd in ignorance
of that prospecting is permissible made arrangements for cutting the farm into plots and
selling them. Because of Nel’s action Boyd had to abandon his plans and suffered damages.
HELD: Boyd had the full period of action for considering whether he would buy and as Nel
had broken his agreement an action for damages was a suitable one. NB: An option or time
limit given to consider an offer is a separate contract binding on the offeror. See also Hersch
v. Nel, Laws v Rutherford where if there is no acceptance within the stipulated time no
contract is formed and it is too late for offeree to accept after expiration of option unless
offeror agrees.
4. Offer must be communicated to the offeree or made known to the offeree:
An offer has no force until it is communicated or made known to the offeree. The principle is
that a person who does not know of an offer cannot accept it. Bloom v American Swiss Watch
Company FACTS: A company from whom diamonds and jewellery had been stolen, by
means of an advert in the press offered £500 for information to be given to the C.I.D which
could lead to the arrest of the thieves and recovery of stolen items. Bloom in ignorance of the
offer supplied the information and afterwards having heard of it claimed the reward and was
unsuccessful. HELD : the court ruled out though an advert which offers a reward amounts to
an offer, bloom was unaware of its existence and therefore can be no acceptance by a person
who is ignorant of the offer and he did not succeed.
5. Offer must not have been revoked
Hyde v Wrench FACTS: defendant offered to sell land to the plaintiff for £1000. plaintiff
agreed to pay £950. The defendant rejected this. plaintiff then agreed to the initial £1000 after
all, but by now the defendant no longer wished to sell. Plaintiff sued for breach of contract.
HELD: the plaintiff made a counter-offer which rejected the offer previously made by
defendant. thus he could no longer revive the original offer of the defendant by tendering an
acceptance of it. a counter-offer rejects revokes the original offer to which the counter-offeror
may therefore not return unless original offeror agrees. See also Watermeyer v Murray
6. Offer must be made with the intention of being accepted by some other party.
Offer must more than a mere invitation to treaty.
Crawley v Rex FACTS : a shopkeeper in Johannesburg advertised a particular brand of
tobacco at a cheap price. The advert was in form of a placard placed outside the shop on
which the price was indicated. Crawley entered the shop bought the tobacco and left. He came
back and asked for another cigarette. This time the shopkeeper refused to sell him and
Crawley refused to leave the shop. HELD : the display of goods by the shop keeper was a
mere invitation to do business. The advertisement was not an offer and contract was not
therefore concluded when Crawley tendered the price. Instead Crawley was convicted under a
Transvaal ordinance for not leaving premises when required to do so.
Gibson v Manchester City Council FACTS: MCC tenant Gibson received a letter from the
M.C.C. saying it may be prepared to sell the stand to him at £2180. Gibson formally applied
but M.C.C refused to sell the property. Gibson sued M.C.C but lost because the court ruled
that the letter was an invitation to treaty not an offer. Hence there was no contract between the
two parties
Pharmaceutical Society of Great Britain v Boots Cash Chemist, the plaintiff argued that boots
had offered to sell to the public drugs without there being a qualified pharmacist present
Contrary to the requirements of some section of the Pharmacy and Poisons Act. In its defence
boots argued that goods on display on a shelf were merely an invitation to treaty and its
customers who made offered on the point of sale where a qualified pharmacist was stationed.
Boots was acquitted.
NB If an offer is made to a specific person it cannot be accepted by a third person Bird v
Summerville & Anor
NB. The following are not offers.
i.
Invitation to tender Spencer & Ors v Harding & Ors
ii.
iii.
iv.
v.
vi.
Newspaper adverts in general, Shepherd v Farrell Estate Agent
Displays on self service counters/shelf, Pharmaceutical Society of Great Britain v
Boots Cash Chemist
Displays on windows, Crawley v Rex
Adverts by transport companies of their charges.
Statements of lowest price in response to a specific enquiry, Harvey & Anor v Facey
& Ors FACTS : plaintiff sent a telegram regarding the price of a certain land, ‘will
you sell us Bumper Hall Pen? Telegram lowest price-answer paid.’ To which the
defendants responded ‘lowest price for Bumper Hall Pen £900, Harvey responded ;
‘we agree to buy Bumper Hall Pen for the sum of £900 asked by you’ but the
defendants refused to sell, the plaintiffs sued claiming that defendant’s response to his
enquiry of lowest price implied an offer to sell which they had accepted. HELD: there
was no offer only a response to a specific enquiry.
Rules Relating to Adverts
As a general rule an advert is not an offer, it is a mere invitation to treaty or to do business. The
customer is thus to offer the marked price for the article and the tradesman can accept or reject the
offer. This is authority from Crawley v Rex.
Exception to the general rule
An advert can amount to an offer where a general offer has been made ‘to do business with whoever
shall perform certain acts’. Reward advertisements are offers and therefore binding on the offeror if
accepted by anyone acting as required, in which case notification of acceptance is unnecessary.
Carlill v Carbolic Smoke Ball Company FACTS: the company manufactured smoke balls which were
meant to prevent influenza. It placed an advert in the local press stating that anyone who used their
product in a prescribed manner would not catch/contract influenza and if that happens the company
would pay £100, the company even deposited £1000 with their bankers to meet any claims. Mrs
Carlill bought the smoke balls and used it as prescribed but nonetheless caught influenza. She claimed
the £100 but the company claimed the advert was not an offer but simply an invitation to treat- a
‘mere puff’ directed at no-one in particular and regarding which acceptance had been notified. HELD
: Mrs. Carlill’s claim succeeded. The court noted that the advert was no mere puff as indicated by the
deposit of £1000 with the bank , the advert was specific ‘ offers to anyone who performs the
conditions made in the advertisement, anybody who performs the conditions of the advert accepts the
offer and that no notice of acceptance is required because the person making the offer shows by his
language and from nature of transaction that he does not expect and does not require notice of the
acceptance apart from notice of performance.
Reward cases therefore represent the only contractual situation where an advert does amount to an
offer or constitutes an offer. However no reward can be claimed by anyone who fulfils the
requirements of the but is unaware of the reward Bloom v American Swiss Watch Company.
In cases of reward situation it must noted that only the first person to act as required can only claim
the reward provided he is aware of the offer of reward. A second person acting as required cannot is
not entitled to the reward, Lee v American Swiss Watch Company, Lee gave the information after
bloom. However since the Cape Provincial Division in the Bloom case had ruled him ineligible to
claim the reward the question was whether Lee could claim the reward instead. Lee’s claim failed as
only the first person acting as required by the advert provided he knew of the reward can claim it.
Consequently any person who is not first will not receive the reward even if the party who was first
did not receive the reward.
Termination of an offer
1. Death of offeror or offeree- if either of these parties dies before acceptance, then the
offer will as a general rule terminate. In De Kook v Executor of Van Der Wall it was
held tat an offer of donation could not be accepted after death of offeror. However
there are cases where the offeror persists beyond the grave. This is where the offeror
had intention that his executor should continue with the offer after his death and so
enter into contract on his behalf. Costain & Partner v Godden
2. Rejection/refusal of offer- an offer comes to an end if rejected by the offeree either
by communicating expressly or making a counter-offer. In Watermeyer v Murray W
offered to sell his farm to M on certain conditions. M did not accept unconditionally
but made a counter-offer, stipulating a different date for the payment of a down
payment. W was not prepared to deviate from the original terms. M then purported to
accept the original offer. It was held that the original offer had come to an end on the
counter-offer being made and therefore no longer open for acceptance and there was
no contract. See also Hyde v Wrench
3. Revocation/withdrawal-the offeror may withdraw/revoke his offer any time before
acceptance. It is important that the offeror communicates his withdrawal to the
offeree so that offeree will not act in his prejudice. An offer cannot be withdrawn
after acceptance. Greenberg v Wheatcroft. On June 6 W signed a written offer to buy
a certain land from G the owner, on June 7 W telephoned G’s agent revoking the
offer. On June 8 G signed an acceptance on the document containing the written
offer. It was held that the offer had been effectively revoked on June 7and was no
longer open for acceptance. NB Revocation is only effective when communicated or
brought to the knowledge of the offeree. This was enunciated in Byrne & Co v Leon
Van Tiehoven & Co where the defendants in Cardiff offered to sell goods in a later
posted on the 1st of October., the plaintiffs in new York telegrammed their
acceptance on 11 October , The defendants meanwhile posted a letter revoking the
offer on 8 October but the revocation letter arrived on October 20. The defendant
refused to deliver the goods. The revocation was held to be inoperative until the 20 th
and the contract was upheld since acceptance was made on the 11th.
4. Lapse/Effluxion of time- if an offer is for a fixed period of time and the offeree does
not accept the offer within the prescribed time then the offer will terminate or lapse.
Even where there is no time limit specified the offer must be accepted within
reasonable time otherwise it lapses. It is an implied term in every offer that it must be
accepted with reasonable time failure of which the offeree will be held to have
rejected the offer.
Generally an offer lapses in the following ways
a) After reasonable time- Ramsgate Victoria Hotel & Co v Montefiore: M
applied for shares in the hotel company on 8 June but no allotment was made
until November 23. On November 8 he withdrew his application. It was held
that the allotment must be made in reasonable time, it was not made and so
the offer lapsed
b) If not accepted within prescribed time- Laws v Rutherford: R gave a 3
months option to enter into contract to cut timber on her farm which expired
on July 26. Having had nothing R asked L to remove certain plant he had
erected on the farm. On July 28 by letter and 29 by telegram L purported to
exercise the option. HELD: as L had not notified his acceptance within the
fixed time a rule nissi ( provisional court order) interdicting him from cutting
timer had been properly been made final.
c) If the intended performance becomes illegal or impossible, Wilson v Smith
& Anor.
Rules of Acceptance.
In order for a contract to come into being the offer ought to accepted. It follows therefore that if offer
is not accepted, no contract can come into being, and neither party (offeror and offeree) acquires
rights until valid acceptance is made.
Requirements of a valid acceptance.
1. Must be definite and unequivocal
It must also exactly correspond with the terms of the offer. Thus offer must be accepted as it
is stands and any alterations or conditional acceptance may make the purported acceptance a
counter-offer instead which cancels the original offer( see Hyde v Wrench, Watermeyer v
Murray and Jones v Reynolds) NB The offeror may accept the counter-offer but if he does not
the counter-offeror cannot insist on reverting back to the original offer unless the original
offeror agrees. However a request for consideration of the the offer for some variation in the
manner of performance e.g. asking for credit where offeror has not specified cash does not
constitute a counter-offer.
2. Acceptance must be made before offer is revoked or lapses
See Laws v Rutherford and Ramsgate Victoria Hotel Co v Montefiore.
3. Acceptance must be made by the person for whom offer was intended
The right to accept an offer cannot be ceded by offeree to a third party. Thus if A offers to B a
third party C cannot accept nor may B & C accept (see bird v Summerville & Anor). Please
note that in Hersch v Nel it was held that ‘an option to purchase for cash is ordinarily capable
of being cede.’ Blew v. Snoxwell B offered to buy a piece of land from a company Richard
Currie Ltd. However unknown to B the land did in fact belong to S, who upon knowing it
wrote to Richard Currie accepting it whereupon B was notified. In a lawsuit later B argued
that there was no contract between him and S. The court agreed holding that “ it is a trite of
law that an offer made by one person to another cannot be accepted by a third party. In this
case offer was made to Richard Currie Ltd not S.”
4. Acceptance must be made in the manner prescribed by offeror
The manner in which acceptance is to be made may be expressly prescribed by the offeror. If
acceptance is not made in the manner prescribed there is no contract. This is highlighted in
the case of Eliason v Henshaw where an offer by E to buy flour from H was made and
brought to H by wagon. In terms of the offer H was supposed to send his acceptance by
wagon. H thinking he would reach E faster quickly by post accepted by letter which arrived
after the wagon. It held the acceptance was invalid and therefore no contract. This ruling
though controversial is authority for the proposition that where mode of acceptance is
stipulated acceptance by any other mode is void.
5. Acceptance must not be based on some justifiably mistaken belief
A contracting party may only avoid a contract based on mistake if it can be proven that 1. The
mistake is a Justus error i.e. a reasonable one and that the mistake was material and essential.
See Beyers v McKenzie, Sampson v Union & Rhodesia Wholesale Ltd and Diedericks v
Minister of Lands 1964 SA.
6. Acceptance like the offer itself must be consistent with the requirements of a valid
contract
7. Acceptance must be communicated.
 Either expressly or by conduct Carlill v Carbolic Smoke Ball Co
 Silence cannot be acceptance, except where there is a duty expressly to repudiate as
with brokers’ notes. Felthouse v Bindley
 Where a specific form of acceptance is demanded by offeror, acceptance by any
manner is void (Eliason v Henshaw)
Acceptance by post.
Postal rule – expedition theory
The basic rule is that manner of offer implies manner of acceptance. Consequently written offer
should unless stated otherwise be followed by a written acceptance. Acceptance is effected at the time
of posting i.e. it becomes a contract on posting. This applies eve where the address of the offeror has
changed. A letter through the post is subject to many misfortunes like
i.
ii.
iii.
It may get lost
It may be delayed and
A dishonest offeror may say he never received the letter of acceptance
NB Notwithstanding all this the law still says the contract is created because offeror elected
acceptance be by post, he assumed all the risks associated or attached to the post. In Household Fire
& Carriage Accident Insurance Co v Grant: Grant wrote offering to buy 10 shares in the company
and enclosing a deposit. The company with a letter of allotment-thus accepting his offer. But this
letter never arrived. Nevertheless- when the company went into liquidation later the liquidator sued
for money still owing on the shares. Court held that there was a contract indeed and grant as offeror
was liable e chose method to communicate by post thus making it his messenger and agent- and
consequently assumed by implication the risk of delay and accident. Therefore since Post Office was
impliedly authorised for acceptance, such acceptance was valid at time of posting-regardless of
whether it was lost or not.
In Levben Products Pvt v Alexander Films an acceptance by post failed to t arrive. It was claimed that
this was because it was addressed the Levben Products Sinola street instead of Sinoia street. The court
said acceptance was valid, the mistake was immaterial. Also refer to Cape Explosives Works Ltd v
South African Oil and Fat Industries and Cape Explosive Works Ltd v South African Oil & Fat
Industries.
NB The rule also applies to offer and acceptance by telegram but not by telephone and telex. In the
case of instantaneous communications telephone and telex which are distinct from mailed
communication, the contract is only completed when acceptance is received by the offeror.
Acceptance by telegram
Yates v Dalton : On 12 February, Yates telegraphed an offer of lease of a cafe to Dalton’s agent
Schoeman. At 0940hrs on 13 February Schoeman telegraphed an unqualified acceptance. But just
after 1100hrs Schoeman received a telegram from Yates cancelling the offer. It was held that the
effect of Schoeman’s wire on the 13th was to create a contract between the 2 parties. Acceptance by
telegram is governed by the same rules as acceptance by post.
Acceptance by telex
Entores Ltd v Miles Far East Corporation: Plaintiffs made an offer by telex to agents of the
defendants in Amsterdam. Telexed acceptance from Amsterdam was received by the plaintiffs in
London. In an action later for breach of contract, dispute was, where was the contract concluded and
therefore which country’s courts had jurisdiction. The British courts had jurisdiction it was held.
Communications by telephone or telex are instantaneous and the rule about instantaneous
communications is different from rules about post. The contract is only complete at the time and place
acceptance is received. In the event of a failure in transmission of an attempted acceptance is known –
and ignore by the offeror the offeror is bound.
Acceptance by telephone
Tel Peda Investigation Bureau v Van Zyl. Van Zyl a resident of east London sued the Tel Peda
company of J’burg for money owed to him in respect of an investigation which he had carried out for
the company. The company’s offer of employ him was made by phone from Johannesburg during
which Van Zyl speaking in East London accepted. The company challenged Van Zyl’s contention that
this brought the case within the jurisdiction of the East London courts. The company was correct. The
contract was only concluded when acceptance was conveyed to the company in Johannesburg and
therefore the Johannesburg court had jurisdiction. The principle is that acceptance by telex or
telephone is only effective at the time and place of receipt. JP Jennet in Entores Ltd v Miles Far East
Corporation “it was said that communications by means of telephone or telex are virtually
instantaneous and that no good reason exists for a departure from the general rule that acceptance of
an offer must reach the offeror... the reasons given for that are conclusion are clear and convincing.
Parties in telephonic communication with each other are virtually in the same position as if they are
inter praesentes. In order to speak to each other they make use of an instrument that enables them to
do so. The very object of their using such instrument is to gain the direct communication that it
affords. It follows that when the telephone is used to make an offer, the offeror is not authorising a
method of acceptance which will be binding on him whether or not he is made aware f the
acceptance”
Quasi mutual assent.
If one party’s words or actions give one reasonable understanding that their minds had met then a
contract was concluded even in truth their minds had not. A person’s state mind is evidenced by
actions and words. However, words and action maybe ambiguous or be misunderstood. In such cases
the rule to apply is that in Smith v Hughes 1871:
“if whatever a man’ real intention may be, he so conducts himself that a reasonable man would
believe that he was assenting to the terms proposed by the other party and that other party upon belief
enters into a contract with him, the man conducting himself would be equally bound as if he had
intended to the other party’s offer. There is an expectation of good faith by a reasonable man relying
on the actions or words of another.”
Void, voidable and enforceability of contracts.
Void contracts
Not really contracts in the sense that it will not be recognised by the courts and no rights can be
acquired under it. A contract is said to be void if it lacks one of the essentials of a valid contract e.g. a
contract which is illegal is void i.e. forbidden by the law or contra bonos mores. A contract which is
spoiled by some fundamental mistake of law is void e.g. where parties are not thinking of the same
item like in Raffles v Wichelhouse.
Voidable contract
A contract which may be avoided at the option of one parties in the contract. Contracts induced by
duress, undue influence and misrepresentation maybe avoided. Similarly minors can avoid contracts
because the law protects them against contractual consequences of their lack of experience and
knowledge.
Enforceability of contracts.
A contract which is perfectly valid in all aspects may be rendered unenforceable. A contract which is
unenforceable from the onset is said to be void ab initio e.g. an illegal contract. Contracts may also be
rendered unenforceable if it lacks some technical agreement or performance of it has become legally
or naturally impossible. The enforceability of contracts is affected by the following
Misrepresentation.
A misrepresentation is a statement of fact made by one party (representor) (representee) to the other
which while not forming a term of the contract is yet one of the reasons that induces the representee to
enter into contractor. A misrepresentation is simply a representation which is not true.
Misrepresentation can either be fraudulent i.e. maker of the representation knows it is false or has no
belief in its truth, negligent where maker of representation fails to display that degree of care which a
reasonable man in his position would display or innocent made without fault or intention of prejudice
is neither fraudulent nor negligent.
The rule is that a misrepresentation of whatever nature renders the contract unenforceable at the
instance of the aggrieved party. The misrepresentation must however be:
1.
2.
3.
4.
Material
Injured party must prove that he entered into contract on the strength of the misrepresentation
Misrepresentation must relate to a matter of fact not law
Misrepresentation must be addressed to the victim and made by the other party to the contract
or his agent not by a third party
NB While silence is not misrepresentation some types of contracts impose a duty to disclose e.g.
insurance contracts.
Remedies for misrepresentation are rescission where innocent party is entitled to claim back
whatever he has lost and return whatever he has received and parties return to status quo ante. This is
called restitution. The second remedy is damages which is intended to put the injured party in a
position he would have been had it not been for the misrepresentation. Damages are not available
where misrepresentation was innocent in which case the injured party must resort to rescission.
Relevant cases, Donner Motors v Kafinya, Dibley v. Furter, Wegner v. Surgenson and Lamb v Walters
Duress
This is when one party is forced into a contract as a result of use of some violence or threat of it or
some illegitimate pressure. Such contracts are voidable at the option of the injured party. Voidable
implies that he can elect to set aside the contract or stand by it. Before the choice to avoid it the
contract is valid and only becomes invalid after the election hence voidable. For one to succeed in a
claim for duress he must satisfy the requirements set out in the leading case of Broodryk v Smuts 1942
i.
ii.
iii.
iv.
Presence of actual violence or reasonable fear
The fear must be caused by threats of some harm to befall the party or his family.
It must be threat of imminent or inevitable harm
Threat must be contra bonos mores as such threats to bring civil proceedings will not suffice
as parties are allowed to institute such proceedings.
Relevant cases Blackburn v Mitchell and Stieger v Union Government.
Undue influence
This occurs when one party uses undue pressure on the other party to induce them into a contract.
This usually occurs when the parties stand in a position or relationship where one has influence over
the other e.g. doctor-patient, lawyer-client. Like duress undue influence renders the contract voidable.
The party seeking to opt out of a contract based on undue influence must prove that:
i.
ii.
iii.
The other party exercised influence over him
This influence weakened his powers of resistance and made him pliable
The other party used his influence in an unscrupulous manner.
Refer to Preller v Jordaan and Patel v Grobbelaar.
The above situations affect the enforceability of a contract based on defective consent. Contracts can
also be rendered unenforceable based on illegality. Patel v Sigauke.
Terms of contract.
A contract has terms which spellout the obligations and rights of parties to the contract. Terms are
simply promises which the parties make andare bound to perform these are also to be done in the
manner discussed by the parties (conditions)
Terms can be essential or non-essential. Essential terms are fundamental conditions/terms whose nonobservation will lead to cancellation of a contract e.g if netsai agrees to a sale of a cotton skirt and a
jean skirt is delivered to her a non-essential term on the other hand has no significant bearing on the
contract e.g. netsai buys a blue cotton skirt and recives a yellow skirt this is a breach of a nonessential term unless it had been agreed to a blue skirt at the conclusion of the sale
Terms can be oral, express or implied
Express terms
These are terms specifically mentioned and agreed to by both parties either in writing or orally.
Implied terms
These are not stated by the parties and are derived from common intention of the parties as inferred by
the courts from express teerms and surrounding circumstances. Terms maybe derived from common
law, trade usage, custom or statutes such terms arise in the following ways:
i.
terms Implied by law
eventhough the contract between parties deas not expressly state these they are however implied in the
contract. Parties cannot agree to exclude terms implied by law. For example in a contract of sale there
is an implied warranty against latent defects. The hire purchase act also implies terms in hire purchase
contracts.
ii.
Terms implied by trade usage
In courts v Jacobs “the requirements of a trade usage are that it must be notorious, certain and
reasonable and not contrary to positive law.” Every usage must have acquired notoriety within the
branch of trade or commerce or in the departments of business or amongst a class of persons who are
affected by it.
iii.
Terms implied by facts/tacit terms
These are not stated but terms which both parties had in mind when they agreed. Such terms may be
inferred by the courts from the express terms of the contract or from the surrounding circumstances
elite electrical contractors v the covered wagon restaurant. These can be terms deemed to be obvious
to the extent that they do not need writing down.
Conditions
A condition is something which must happen or be done before something can happen. There are two
kinds of conditions in the law of contract i.e. suspensive and resolutive
1. Suspensive condition
A contract is suspended or held up if a certain condition is not done e.g. a hire purchase contract has a
suspensive condition that ownership only passes to the buyer when the last instalment is paid. Passing
of ownership is suspended until that happens. A suspensive condition means that something will not
happen until another thing happens first.
2. Resolutive condition
A contract continues until this condition is met then the contract ends. For example in a contract of
sale can have a resolutive condition that ownership returns to the seller if buyer misses an instalment.
When this happens the contract is terminated and parties return to their original position i.e. seller
owns the thing and buyer does not.
SPECIAL TERMS.
Where an offer is made subject to special terms, the offeree will not be bound by them unless he
expressly or impliedly accepts them. Here we are going to look at signed documents and unsigned
documents/ticket cases
Signed documents
Where signed documents are concerned the caveat subscriptor rule ( let the signer beware) will aplly.
The signer is bound by whatever appears before his signature whether he has read the contents or not
this was made clear in burger v csa railwayswhere the learned judge remarked that “ it is a sound
principle of law that a man, when he signs a contract is taken to be bound by the ordinary meaning of
the words which appear over his signature.” In this case burger delivere his goods to the railway for
carriage. He signed a note to the effect that the railway would not be liable for loss due to damage or
theft. The goods were lost and he sued for their value. HED: the railway was not bound or obliged to
compensate him since the note he signed exempted the railway from all liability.
Gearge v fairmead g a hotel geust signed a hotel register which contained contractual terms some of
which he completed by filling blank spaces but the rest he did not read. One clause exmptd the
proprietor from liability for loss caused by theft, certain clothing belonging to g was stolen and he
sued the hotel. HELD: g was bound by the terms because he knew he was signing a contractual
agreement.
Execptions to the caveat subscriptor rule
The rule is designed to prevent a signer who knows fully well what he is agreeing to from repuiaditing
at a later stage. It is also designed to punished the signer who lacks diligence adn is careless. However
there are circumstancs where the signer has good reason to repudiate his assent. The rule will not
apply where signer’s assent was obtained through misrepresentation, duress, undue influence, fraud
orthrough mistake
i.
Misrepresentation
The rule will not apply where a person signing the document was misled. Curtis v chemical cleaning
& dyeing co ltd. C when delivering a dress to the defandants for dry cleaning was asked to sign a
documeny which conained a clause to the effect thta the company will not be liable for any damage
howsoever arising. C asked why she had to sign it. She was told “ to protect the cleaners from liability
for damages to beads and sequins on the dress. She signed without reading th whole document and
left her dress and when she came to collect it it was damaged beyond recognition she sued, the
defendant relied on the caveat subscriptor rule. HELD: the company’s shop assistant made a
misrepresentation innocently but nonetheless misled the plaintiff as to the contents of the document
and relied on it. She was not bound by her signature or the wider indemnity contained in the
document.
ii.
Mistake
It must be a reasonable mistake (Justus error) for the general mistake to aplly. Thus where a person
signs a contract in the mistaken belief that it is totally different document he can escape liability by
pleading non est factum. Foster v mackinnon. M an old man of poor sight was induced to endosre a
bill of exchange for £3000 on assurance that it was a guarantee. The bill was endorsed for value to f
who sued m on the bill. HELD: m’s plea of non est factum was good and he was not liable on the bill